Abe Shooting Inspires Rush To Safety, Yen Paces Gains

The yen turned bid and defensive flows swept across G10 FX space as Japanese media outlets reported that former PM Shinzo Abe was shot in the chest while on campaign trail in Nara. The incident raised questions over Japan's future policy trajectory, given Abe's strong influence over the ruling Liberal Democratic Party.

• The prospect of a shift in the distribution of power within the LDP reopened the debate over the sustainability of the BoJ's ultra-loose monetary policy. The Abe/Kuroda tandem was a critical driving force behind the Bank's powerful monetary easing. There was also speculation that PM Kishida could meet less resistance in pursuing his "new capitalism" reforms.
• JPY crosses went offered in the immediate reaction to the news, while USD/JPY implied volatilities climbed across the curve. Regional risk barometer AUD/JPY is ~1% off from its session highs.
• Price action across the rest of G10 FX space reflected wider aversion to risk as news from Japan diverted attention from other regional headlines/market moves. The greenback edged higher, out of sync with U.S. Tsy yields.
• U.S. NFP report provides the main point of note on today's data docket, with final U.S. wholesale inventories & Canadian jobs figures also due. Central bank speaker slate includes Fed's Williams and ECB's Lagarde, Muller, Visco & Villeroy.